V.11:12 (506-511): The Cumulative Market Thrust Line by Tushar S. Chande, Ph.D.

V.11:12 (506-511): The Cumulative Market Thrust Line by Tushar S. Chande, Ph.D.
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The Cumulative Market Thrust Line by Tushar S. Chande, PhD.

STOCKS & COMMODITIES contributor Tushar Chande originally introduced the concept of market thrust in August 1992 as a method by which to overcome the limitations of the Arms index. Since then, variations have been suggested on the theme and here, Chande offers the variation of a cumulative market thrust line, in which market thrust is cumulated to calculate a volumetric advance-decline line by including the effect of up and down volume.

Simply stated, the advance-decline (A-D) line, which is a broad-gauge measure of market activity, is the cumulative sum of advancing minus declining issues. The daily number can be positive or negative, and so, the advance-decline line can increase or decrease. The actual value of the current running total depends on the starting date of the calculation that the investor or trader may choose.

During bull markets, advancing stocks are more numerous than declining stocks, while the reverse is true during bear markets. As a result, it is the direction of the A-D line that is more important than the current value. The A-D line rises during broad-based bull markets and falls during bear markets.

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